Word: defaulters
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Dates: during 1980-1989
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Over the past decade, Whoops borrowed $8.3 billion to start construction on a total of five nuclear plants, only one of which is likely to be completed. The bonds in default were issued for two plants that Whoops calls Projects 4 and 5. Some $6 billion worth of other Whoops bonds for Projects 1, 2 and 3 are in no immediate danger of default, but investors are increasingly afraid that these securities will also eventually be in jeopardy. Projects 1,2 and 4 are located at the Hanford Nuclear Reservation in eastern Washington, while 3 and 5 are at Satsop...
...default had been expected for weeks, so the municipal bond market reacted quietly, with most prices holding fairly steady. But concern about Whoops' woes had been depressing the market for months. Public utilities building power plants have had to promise exceptionally high tax-exempt interest rates of more than 9% to sell new bonds. Several utilities, like North Carolina Municipal Power Agency No. 1, postponed their offerings to avoid testing the market. Some industry insiders fear that the continuing Whoops mess could ultimately sour investors on the entire spectrum of municipal bonds. Says James Lebenthal, whose appearances in television...
Victims of the default, who thought the bonds were a safe haven for their money, were feeling outrage and despair. Many elderly bondholders were depending on the securities for retirement income, but the bonds that had been bought as recently as March 1981 for $5,000 sold last week for as little as $700. Robert Kahn, 69, a former court reporter living in Hollywood, Fla., and his wife Selma, 67, had $10,000 invested in Whoops Nos. 4 and 5 bonds. Says he: "I felt secure. That was the whole point of buying the bonds. I didn't want...
Bondholders eager to reduce their losses are banding together to sue virtually everyone with any connection with the default. Besides Whoops, the defendants include a group of 88 utilities in the Northwest. They had originally agreed to pay for the plants, but later some of them backed out of their contracts. Other suits name such prominent brokerage houses as Merrill Lynch, Prudential-Bache Securities, Smith Barney and Salomon Bros., which enthusiastically sold the Whoops bonds. They are accused of withholding crucial information about the agency's deteriorating finances. Even Moody's Investors Service and Standard & Poors were hauled...
...held town meetings to protest. Complained Mark Reis, executive director of a Seattle energy-conservation coalition: "They promised us power without cost, and they delivered cost without power." Some of the utilities tried to renege on their take-or-pay contracts with Whoops, and that raised the specter of default. New York City's Chemical Bank, trustee for the bondholders, took Whoops and the utilities to court. After 13 months of legal skirmishing, the Washington State Supreme Court decided against the bank and the bondholders. In a ruling that surprised legal experts, the court said that the public utilities...